PEEHIP GASB 75 Report - The Retirement Systems of Alabama

GASB STATEMENT NO. 75 REPORT

For the Alabama Public Education Employees' Health Insurance Plan

PREPARED AS OF SEPTEMBER 30, 2017

FOR FINANCIAL REPORTING AS OF SEPTEMBER 30, 2018

Cavanaugh Macdonald

C O N S U L T I N G, L L C

The experience and dedication you deserve

May 1, 2018

Retirement Systems of Alabama P.O. Box 302150 Montgomery, AL 36130-2150

Dear Members of the Board:

Presented in this report is information to assist the Alabama Public Education Employees' Health Insurance Plan (PEEHIP) in meeting the requirements of the Governmental Accounting Standards Board (GASB) Statement No. 75 for the participating employers. The information is presented for the one-year period ending September 30, 2017. GASB Statement No. 75 (GASB 75) establishes accounting and financial reporting requirements for governmental employers who have other postemployment benefits (OPEB) plans. This report has been prepared as of September 30, 2017 (Measurement Date) for financial reporting as of September 30, 2018. The calculations in this report have been made on a basis that is consistent with our understanding of the accounting standard. This is the first report issued under GASB 75.

The annual actuarial valuation performed as of September 30, 2016 was used as the basis for much of the information presented as of September 30, 2017 in this report. The valuation was based upon data furnished by the Alabama Teachers' Retirement System (System) and the PEEHIP staff, concerning active, inactive, and retired members along with pertinent claims data and financial information. This information was reviewed for completeness and internal consistency, but was not audited. The valuation results depend on the integrity of the data. If any of the information is inaccurate or incomplete our results may be different and our calculations may need to be revised.

To the best of our knowledge, the information contained in this report is complete and accurate. These calculations were performed by, and under the supervision of, independent consulting actuaries with experience in performing valuations for public retirement systems and retiree health benefit plans. In addition, the valuation was prepared in accordance with generally accepted actuarial principles and practices as well as with Actuarial Standards of Practice prescribed by the Actuarial Standards Board.

3550 Busbee Pkwy, Suite 250, Kennesaw, GA 30144 Phone (678) 388-1700 ? Fax (678) 388-1730 Offices in KennesaOwff, GA ? Bellevue, NE

May 1, 2018 Page 2

The calculations are based on the current provisions of the System, and on actuarial assumptions that are, individually and in the aggregate, internally consistent and reasonably based on the actual experience of the System. In addition, the calculations were completed in compliance with the laws governing the System. The undersigned are members of the American Academy of Actuaries and meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained herein.

These results are only for financial reporting and may not be appropriate for funding purposes or other types of analysis. Calculations for purposes other than satisfying the requirements of GASB 75 may produce significantly different results. Future actuarial results may differ significantly from the current results presented in this report due to such factors as changes in plan experience or changes in economic or demographic assumptions.

This is to certify that the independent consulting actuary is a member of the American Academy of Actuaries and has experience in performing valuations for public retirement systems and retiree health benefit plans, that the valuations were prepared in accordance with principles of practice prescribed by the Actuarial Standards Board, and that the actuarial calculations were performed by qualified actuaries in accordance with accepted actuarial procedures, based on the current provisions of the medical plans and on actuarial assumptions that are internally consistent and reasonably based on the actual experience of each plan.

Respectfully submitted,

Alisa Bennett, FSA, EA, FCA, MAAA Principal and Consulting Actuary

Edward A. Macdonald, ASA, FCA, MAAA President

Section I II III IV V Schedule A B C D E F

TABLE OF CONTENTS

Item Summary of Collective Amounts Introduction Financial Statement Notes Required Supplementary Information OPEB Expense

Page No. 1 2 4 11

13

Employer Allocations

16

Pension Amounts by Employer

23

Discount Rate, Amortization, and Employer Contribution

28

Summary of Main Benefit Provisions

32

Outline of Actuarial Assumptions and Methods

37

Deferred Outflows and Deferred Inflows of Resources

44

REPORT OF THE ANNUAL GASB STATEMENT NO. 75 ALABAMA PUBLIC EDUCATION EMPLOYEES PREPARED AS OF SEPTEMBER 30, 2017

SECTION I ? SUMMARY OF COLLECTIVE AMOUNTS

Valuation Date (VD): Prior Measurement Date: Measurement Date (MD): Reporting Date (RD):

September 30, 2016 N/A

September 30, 2016 N/A

September 30, 2016 September 30, 2016 September 30, 2017 September 30, 2018

Single Equivalent Interest Rate (SEIR): Single Equivalent Interest Rate at Prior Measurement Date Single Equivalent Interest Rate at Measurement Date

N/A 4.01%

4.01% 4.63%

Net OPEB Liability: Total OPEB Liability (TOL) Fiduciary Net Position (FNP) Net OPEB Liability (NOL = TOL ? FNP) FNP as a percentage of TOL

$ 9,272,437,170 $ 8,775,991,786

1,240,200,000

1,348,563,000

$ 8,032,237,170 $ 7,427,428,786

13.38%

15.37%

Collective OPEB Expense:

N/A

$448,664,565

Deferred Outflow of Resources:

$0

$0

Deferred Inflow of Resources:

$0

$810,733,498

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